SHANGHAI Shenyin Securities, a pioneer in China's brokerage industry, has enlisted the help of five international investment banks to provide advisory services to state enterprises. The brokerage has established an informal grouping with investment banks from Europe, the United States, Japan and Hong Kong to advise enterprises. 'This is a new field for us, and if it works out well, it will become a major business focus in the coming years,' He Jianhua, deputy director of the president's office, said. He declined to name the foreign partners, but said they were companies that Shenyin had worked with in underwriting shares. The informal group, initially working as a pilot scheme, would assess the enterprises' operations and design financial blueprints to help them raise their efficiency or competitiveness. 'If we think the enterprise needs financing, we will work out the best plan for it to raise funds. 'If it needs to be merged or restructured, we will see how best that can be done,' Mr He said. Plans suggested for the enterprises would have to conform with aims set out by the administrative bodies controlling them, he said. Analysts said that as state enterprise reform was a key part of China's economic plan, the new field Shenyin was venturing into could become its engine of growth in the next few years. Mergers and acquisitions could generate business in the absence of a domestic investment bank to advise companies, they said. China is also gradually cutting low-interest loans to state enterprises, forcing many to look for alternative ways of raising funds. Analysts said there was a snag in that not many state enterprises could afford investment banks' fees. 'The informal partnership between foreign investment banks and us is an arrangement beneficial to both sides,' Mr He said. Mr He said Shenyin knew the domestic market well and had an extensive network of contacts, while its foreign partners could provide expertise it lacked. Shenyin, set up in 1984, is the first national brokerage approved by the People's Bank of China. Its 60 securities trading departments give it the largest network among domestic brokerages. With assets of six billion yuan (about HK$5.58 billion), it is the third richest in the country. Sources said a merger expected with Shanghai International Securities (Wangguo in Chinese) would put Shenyin ahead of competitors such as China Guotai Securities, Huaxia Securities and China Southern Securities. Sources said vice-mayor Hua Jianmin and Shanghai Securities Administration Office chief Han Zheng brokered the merger deal on Monday. 'The proposal for merging with Shenyin will have to be put before the Wangguo board,' an official in the president's office at Wangguo said. Under the proposed deal, Shenyin and Wangguo would merge into one entity, Shenyin Wangguo Securities, a marriage which could lead to the creation of China's first home-grown investment bank.
